Fund analysts at Morningstar have downgraded Aled Smith’s £981m M&G American and £921.9m M&G Global Leaders funds, citing “weaker” US stock selection in recent years.
Both funds have comfortably outperformed their benchmarks and peer groups over 10 years, according to FE Analytics, but have underperformed in one, three and five-year periods.
The M&G Global Leaders fund, which Mr Smith has run since 2002, has been downgraded from ‘silver’ to ‘bronze’, while the M&G American fund has been cut from ‘bronze’ to ‘neutral’.
Morningstar analyst Karen Jones said: “We are concerned that stock selection [on the M&G American fund] has been weaker over recent years and the fund’s return profile has been more volatile than we would have expected.
“There have also been more changes in the team than we would ideally like to see. Consequently we believe it is prudent to lower the fund’s rating to ‘neutral’ reflecting the reduction in our overall conviction.”
Ms Jones also cited “weaker stock selection from the US equity holdings” as a reason for downgrading the Global Leaders fund.
Since Mr Smith took on the M&G American fund at the start of 2005 the fund has gained 105.9 per cent, compared with an average 93 per cent gain from the IMA North America sector and 75 per cent from the S&P 500 index, according to FE Analytics.
However, the fund has fallen to the bottom quartile of the sector across one, three and five-year periods.
It is a similar story for the Global Leaders fund, with the portfolio having gained 130.7 per cent in 10 years, comfortably outperforming the IMA Global sector’s average return of 103.6 per cent and the 87.6 per cent rise in the MSCI AC World index. But the fund underperformed its peer group and the benchmark in one, three and five year periods.
